Chaos over biggest employment tax shake-up in Seventy years
Businesses and families are heading into a “nightmare” today, amid fears that the biggest employment tax shake-up in 70 years will ensnare companies in red tape.
Accountants said that many businesses are “completely unprepared” for a wave
of bureaucracy coming into force tomorrow when employers will have to report
Pay As You Earn (PAYE) information in “real time”.
They also warned that HM Revenue & Customs may not be able to cope as
thousands of its staff are going on strike this Monday and its computer
systems have been undergoing “essential maintenance” for the past few days.
Under the new Real Time Information (RTI) system, more than a million
businesses — as well as charities, churches and families who employ nannies
or cleaners —must report immediately any wage payments to the taxman.
Small businesses have a six-month grace period in which they can report once a month, but they will still have to get to grips with complicated new rules and computer software before complying fully in October
" The changes come despite David Cameron’s promise to “cut back on excessive rules” to help “unleash our small businesses”.
The new system is the foundation of the Coalition’s universal benefit welfare
reform, because it will allow officials to adjust handouts immediately when
their earnings change.
Last night a number of experts warned of impending disaster.
The Chartered Institute of Taxation said that many small businesses were thinking of folding because the system is the last straw in a long line of excessive bureaucracy from the taxman.
It described the RTI as a possible “route to insolvency”.
In a further warning to the Government, Dr Adam Marshall, a director of the British Chambers of Commerce, described RTI as a “massive change to the way that businesses operate across the UK” that may distract them from generating wealth and breaking into new markets.
He urged HMRC not to “underestimate the potential for problems” over the next few months as firms get to grips with the rules.
Among the problems facing the new system is the planned strike of up to 55,000 officials at HMRC, including call centre staff.
The PCS union has targeted the industrial action to upset the start of RTI and the beginning of the tax year. Meanwhile, the HMRC internet “gateway” for workers to access and report their tax information has been under maintenance.
Darren Fell, the managing director of Crunch Accountants, said the system is heading into a “disaster zone” over the weekend and early next week, because there will be a backlog of people trying to use the website as the changes come into force.
“Chaos is what we’re expecting,” he said. “It’s going to have to be the most amazing system in the universe to cope with it without falling apart.”
Some employers are also complaining that the free HMRC software that they must use on their own computers to submit information to the system has been crashing during its pilot stages.
Others say that the new requirements are so complicated that they will have to seek professional help or invest in expensive software, rather than use the free HMRC version.
Chris Mugford, the managing director of The Web TV Company, which produces online videos, has had to employ a bookkeeper for a company of only two people because of the changes.
Many employers are unaware of the changes, even though they are meant to have received a letter from the taxman. One survey estimates that one in five businesses is unprepared, while the Association of Accounting Technicians found that one in three small businesses is in the dark.
Baker Tilly, a firm of accountants, said one message from HMRC about further changes was written in “gobbledegook”.
The scheme has had unintended consequences for many groups that make payments,
including pension funds.
Up to 25,000 pensioners with the John Lewis Partnership scheme are losing a month of pension, as their managers told them they must switch from paying at the beginning to the end of the month. It has had to offer its members loans to tide them over.
Companies have been told they do not face fines for late reporting for another year, but they could still be hit with penalties for submitting inaccurate data about their employees.
Tina Riches, an expert at the Chartered Institute of Taxation, questioned whether it was “workable” to make every employer report real-time pay information until October when they will all be subject to the same stricter rules.
“We are hoping they will extend it [the grace period] because we’ve heard of quite a lot of cases of smaller businesses thinking of packing up as it’s just the last straw,” she said. “It’s mainly ones that have odd hours that are just paid when they finish their work, particularly in the pub and hospitality trade. It’s potentially a lot of extra work for them.”
She said many employers still might not know that they should be complying with the new requirements from today.
“It could be a church that employs a cleaner and an organist,” she said. “Anybody that employs somebody under PAYE in their own home, such as a gardener, a cleaner or a nanny.”
Last night, Christopher Millington-Hore, who runs a family firm of accountants, said small business owners were facing an administrative “nightmare”.
Robin Worsnop, chief executive of Rabbie’s Small Group Tours, a tour company, said the new requirements will “add another layer of stress” on payroll day.
HMRC last night said that customers have reported no problems with downloading its software. A spokesman said HMRC believes 85 per cent of businesses are aware of the RTI changes, after an advertising campaign and two letters to all employers. It said the website maintenance should not affect businesses trying to submit RTI information.
Last night a number of experts warned of impending disaster.
The Chartered Institute of Taxation said that many small businesses were thinking of folding because the system is the last straw in a long line of excessive bureaucracy from the taxman.
It described the RTI as a possible “route to insolvency”.
In a further warning to the Government, Dr Adam Marshall, a director of the British Chambers of Commerce, described RTI as a “massive change to the way that businesses operate across the UK” that may distract them from generating wealth and breaking into new markets.
He urged HMRC not to “underestimate the potential for problems” over the next few months as firms get to grips with the rules.
Among the problems facing the new system is the planned strike of up to 55,000 officials at HMRC, including call centre staff.
The PCS union has targeted the industrial action to upset the start of RTI and the beginning of the tax year. Meanwhile, the HMRC internet “gateway” for workers to access and report their tax information has been under maintenance.
Darren Fell, the managing director of Crunch Accountants, said the system is heading into a “disaster zone” over the weekend and early next week, because there will be a backlog of people trying to use the website as the changes come into force.
“Chaos is what we’re expecting,” he said. “It’s going to have to be the most amazing system in the universe to cope with it without falling apart.”
Some employers are also complaining that the free HMRC software that they must use on their own computers to submit information to the system has been crashing during its pilot stages.
Others say that the new requirements are so complicated that they will have to seek professional help or invest in expensive software, rather than use the free HMRC version.
Chris Mugford, the managing director of The Web TV Company, which produces online videos, has had to employ a bookkeeper for a company of only two people because of the changes.
Many employers are unaware of the changes, even though they are meant to have received a letter from the taxman. One survey estimates that one in five businesses is unprepared, while the Association of Accounting Technicians found that one in three small businesses is in the dark.
Baker Tilly, a firm of accountants, said one message from HMRC about further changes was written in “gobbledegook”.
Up to 25,000 pensioners with the John Lewis Partnership scheme are losing a month of pension, as their managers told them they must switch from paying at the beginning to the end of the month. It has had to offer its members loans to tide them over.
Companies have been told they do not face fines for late reporting for another year, but they could still be hit with penalties for submitting inaccurate data about their employees.
Tina Riches, an expert at the Chartered Institute of Taxation, questioned whether it was “workable” to make every employer report real-time pay information until October when they will all be subject to the same stricter rules.
“We are hoping they will extend it [the grace period] because we’ve heard of quite a lot of cases of smaller businesses thinking of packing up as it’s just the last straw,” she said. “It’s mainly ones that have odd hours that are just paid when they finish their work, particularly in the pub and hospitality trade. It’s potentially a lot of extra work for them.”
She said many employers still might not know that they should be complying with the new requirements from today.
“It could be a church that employs a cleaner and an organist,” she said. “Anybody that employs somebody under PAYE in their own home, such as a gardener, a cleaner or a nanny.”
Last night, Christopher Millington-Hore, who runs a family firm of accountants, said small business owners were facing an administrative “nightmare”.
Robin Worsnop, chief executive of Rabbie’s Small Group Tours, a tour company, said the new requirements will “add another layer of stress” on payroll day.
HMRC last night said that customers have reported no problems with downloading its software. A spokesman said HMRC believes 85 per cent of businesses are aware of the RTI changes, after an advertising campaign and two letters to all employers. It said the website maintenance should not affect businesses trying to submit RTI information.
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